Ford and VW look at future alliance

Author/Source: Robin Roberts

4th September 2018

Volkswagen and Ford are pushing ahead with a strategic alliance, beginning with van production, said the German manufacturer.

At the weekend, The Sunday Times reported Ford was looking at 24,000 job cuts in Europe and ending S-Max, Galaxy and Mondeo production to stem losses which hit $73 Million in Q2. The US bosses have also said they will concentrate future production on light commercials, Focus hatchback and Mustang and end saloon ranges.

Saloons have been losing ground to SUVs around the world and the Mondeo is the basis for the Galaxy so it would be hard to justify continuing that MPV range when the world’s buyers are seeking compact SUVs and even larger 4×4 models are struggling unless they are modernised, and offered with hybrid or pure EV powertrains.

The dramatic slowdown in diesel sales has also hit larger models and private sales and Ford Dagenham plant only makes diesel engines while the company’s Bridgend Engine Plant produces the latest petrol engines and is about to commission its new Dragon engine line this autumn.

The Welsh plant supplies vehicle assembly plants around the world and it will have to manage production after Britain withdraws from the EU next spring when it is facing additional tariff duties for importing components and then exporting finished engines.

In his first public comments about the potential tie-up, Thomas Sedran, senior vice president for VW Group strategy, said he was confident a final deal could be reached that would ensure both sides benefit equally, although VW is almost twice the size of Ford.

Automotive News Europe said Morgan Stanley analysts estimate Ford will shed 12 percent of its 202,000 workers, mainly in its European operations. Ford has about 12,000 workers in the U.K. in factories, research and development, administration and dealerships.

There is also the possibility of the Ford dealer network being trimmed to improve return on investments by the network if sales slow down and there are fewer cars to supply and service.

Any new strategic alliance with vans would likely see successor Transit and VW Crafter models and siblings sharing platforms and components, and possibly production lines around the world over the next few years.

In response, Ford stated, “As we said at our second quarter earnings in July, our Europe business requires a major redesign to deliver our longer-term target of 6% EBIT margin.

“It has a strong core product portfolio – commercial vehicles, Kuga C SUV, and selected imports – that last year represented more than 200% of the region’s EBIT.

“The majority of our volume, revenue and capital deployment, however, is in low-performing cars and MAVs. We are focused on aggressively attacking costs, implementing facility and product programme efficiencies to lower product and material cost, as well as capital intensity in Europe. That work is underway, accelerating our performance now, while also addressing the low-performing parts of our business to ensure a sustainably profitable business for the future.”

It went on, “We currently have our strongest-ever vehicle range in Europe. While we regularly evaluate our future product plans based on customer preferences and trends, there are no changes at this time.

“Mondeo remains a core part of our product line-up in Europe. We have upgrades coming for Mondeo later this year, which will see new powertrains as well as exterior and interior updates as well as enhancements to the Mondeo Hybrid range.

“As a whole, this segment is slowing as consumers move towards CUVs and SUVs, but Mondeo continues to deliver on its promise of great driving dynamics, leading technologies and competitive pricing for businesses and families alike.”